Yes you are correct, the Self-Employment Tax is only applied to any gains from the activity when you use Schedule C. To elect depreciation would be your choice, if you buy equipment that has a lifetime of more than 1 year then it is possible that the cost be amortized. The option to depreciating your equipment would be applying Sec 179. This would allow you to expense the purchase or otherwise depreciable equipment. The major factor with Sec. 179 is that it can't be used to create a loss. Before I go totally off topic I would recommend that you file with Schedule C, it would be more profitable in the long run and easier to deduct certain expenses.
